Chapter 16, Problem 9P

a.

Summary Introduction

To determine: The free cash generated if the lockbox system is implemented, the frequency of the cash generated and the effect of the growth.

Introduction:

Lockbox Collection System: The lockbox collection system is that system in which the firms direct their customers to send the payments through a lockbox which is operated by a bank. The customers of a firm can send payments through these lockboxes. This system is used so that the receipt of the cash by the sellers can be collected fast.

b.

Summary Introduction

To determine: The worth of the lockbox system on a yearly basis if the opportunity cost is 6%.

c.

Summary Introduction

To determine: The highest monthly charge for the lockbox system.